On the heels of its “7 bags for 7 cities” contest this spring, Versace launched another contest, this time to coincide with the release of its Greca Stars aviator sunglasses. Taking place from May 4th to 17th, the contest called on consumers to “either take a selfie with the Greca Stars in selected Versace boutiques worldwide and then post it online with the #VERSACESELFIE tag, or they can check the brand’s @VersaceHomeWW, @DVHomeMilan and @VersaceBoutiques to spot a selfie of Donatella Versace sporting the sunglasses."

A smart initiative, the contest got Versace fans to promote the brand on social media (something brands normally pay influencers large sums to do) for largely no cost to the brand at all, save for the few pairs of Greca Star sunglasses that were awarded to contest winners. The problem: The contest was probably illegal.

Versace missed out on one crucial element by not requiring contest participants to indicate that they stood to gain something from posting photos with the #VERSACESELFIE online. As we learned from the investigation that the Federal Trade Commission (“FTC”) initiated against Cole Haan in 2014 and the formal warning it issued to the American brand, contests that result in social media users promoting a brand in exchange for a chance to win a prize require disclose.

Cole Haan's “Wandering Sole” contest, which called on Pinterest users to create boards with images of five Cole Haan shoes for a chance to win a $1,000 shopping spree, was not properly executed. Cole Haan told participants to use the hashtag #WanderingSole with their photos, but did not instruct them to make it clear that they posted the pins as part of a contest. The FTC held that the pins constituted an endorsement of Cole Haan and that the chance of winning a prize by pinning those images was a material connection that needed to be disclosed.

The FTC also noted that it did not believe that the #WanderingSole hashtag adequately communicated the material connection. “Advertisers have to make it clear to the normal consumer that they have to disclose when they’ve compensated or incentivized to endorse a product,” Mary Engle, the FTC’s associate director for advertising practices, said. Hashtags such as #Contest, #Sweepstakes, and/or #Sponsored would likely do the trick.

This brings us to Versace’s contest. Unlike Cole Haan, which is an American brand, Versace is based in Italy, and thus, could arguably be out of the reach of most FTC guidelines. However, since its contest was Internet based, American consumers were able to participate. Moreover, given that Versace has a strong U.S. presence, its “commercial products and services are available to U.S. citizens,” make it subject to FTC regulations.

With that in mind, because Versace does not seem to have informed contest participants of the need to include a disclosure with their posts (which were posted primarily for the purpose of winning sunglasses) and seemingly also failed to monitor such posts, as indicated by the fact that none of the posts included such recommended disclosures, Versace very well could be subject to a merited FTC investigation. (Note: Versace merely including "#Contest" in one of its own Instagram posts is not enough).

Regardless of whether the FTC decides to take action, this – combined with the Cole Haan case – should serve as a warning to brands running promotional contests. In order to avoid FTC liability, you must inform participants of the need to disclose that they are partaking in a contest or sweepstakes and you must implement what the FTC calls a “reasonable monitoring program” to ensure that entrants are doing just that.